Bank of Punjab (BOP) held their Corporate Briefing Session yesterday to discuss the company’s performance. To recall BOP posted 3QCY20 NPAT of PKR2.15bn (EPS: PKR0.81), flat yoy taking 9MCY20 NPAT to PKR5,769mn (EPS: PKR2.18) down 6.5%yoy. The bank did not announce any dividends.
Key Highlights:
The bank is working on a 5-pronged strategy in the following areas (i) controls and compliance, (ii) technology (iii) deposit mobilization particularly private sector deposits and floor deposits (current or savings) (iv) creating markets (leading low cost housing scheme) taking a lead in capital and debt markets, and (v) and launching of commercial business (targeting SME and consumer finance).
Treasury Single Account (TSA) is being implemented on a Federal level for now. The Government of Punjab is trying to replicate the same policy on a provincial level and is engaged with BOP. The net impact of borrowings vs. deposits goes in BOP’s favor as per the management.
The bank is planning to expand its geographical distribution (510 branches in Punjab) towards South region (19 branches in Sindh).
BOP has invested heavily in enhancing human resource in various functions particularly in home remittances, branch business, corporate banking, and IT technology functions tos revamp the business.
The management expects NIMs to improve next year as re-pricing of expensive term deposits takes place. The management is upbeat on projections for deposit mix over the next 3-5 years, where the bank is targeting aggressive mobilization of floor deposits and bringing them to the market average.
The bank has raised its general provisions and done subjective classification ahead of the lifting of the SBP deferment facility in 2021. BOP has partially provisioned the impact of IFRS-9 where implementation is scheduled for Jan’21.
BOP has shed 19%CYTD and trades at undemanding valuations while offering sector beating ROEs (CY20f: 15.3% vs. 14.6% for our coverage space). BOP trades at a CY20f annualized P/B of 0.5x, vs. IMS Banks Median CY20f: P/B of 0.94x).
(Intermarket Securities Limited)